Automotive Headwinds

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Raw materials in 2012 have been a challenge for many automotive suppliers to manage. Suppliers have offset their exposure through customer pass-through pricing, hedging, strategic sourcing and internal productivity. Cost & Capital Partners summarized the past four quarters of company financial statements and comments shared with analysts to identify the impact of raw materials on their bottom line. Most suppliers faced raw material headwinds in the first half of 2012, but many are seeing raw material benefits for the second half of the year and into 2013. The reason for the reduction is due to lower costs for resins and energy due to the US development of shale gas as well as reduced demand for many base commodities.

Analysis of supplier financials provides insight into the results and strategies that suppliers use to mitigate cost increases. We use this approach as a building block to develop fact-based annual savings targets, support negotiations and to develop the supply base. This kind of analysis is also what we train buyers to perform through our Financial Acumen course.